When you’re ready to buy a car, there are lots of reasons why you should consider something pre-owned. In fact, money expert Clark Howard says buying a used car is one of the smartest financial moves you can make.
But the process can be confusing and requires more steps than buying a new car. So, this article covers the steps you need to buy a safe, fairly-priced used car. Keep reading for our 10-step process, which includes:
How To Buy a Used Car in 10 Steps
Here at Team Clark, we’ve spent decades working with consumers to develop insights on the best way to buy a used car. Before we get into the how, here’s a caveat: Buying a used car can be more time-consuming (and possibly more stressful) than buying something new. In fact, Clark calls new cars a “quagmire.” But, that doesn’t mean it’s not worth it. Clark also says:
“My preference is for you to buy a two or three-year-old used car, rather than a new car. Because when you buy a new car, it loses value the minute you drive off the lot.”
On average, the value of a new car depreciates — or drops — around 20% in the first year alone! When you buy a used car, its first owner is the one who takes the hit from depreciation. And there are many other reasons why used cars are a better deal than new cars.
So, let’s look at the steps you can follow to find a great used vehicle.
1. Arrange Your Financing
First things first: Arrange your used auto financing. This step is all about knowing how much you can afford to spend on a used car and where you’re getting the funds. Paying for an affordable used car in cash is always an option.
Otherwise, you can finance through a bank, credit union, or dealership. Just know that where you finance will impact how much you end up paying for the car.
“Most people finance at a car dealer and that is a recipe to shred your wallet,” Clark warns.
Dealerships are known to profit off of rolling costly add-ons into their loans. And banks typically have higher interest rates than credit unions. This why Clark recommends credit unions over banks and dealerships for the best deal.
“With credit unions, what they do is really cool,” he says. “They use a matrix and based on market conditions, they have an interest rate range. That range is set on two factors: your credit score and how long you’re going to finance.”
LendingTree reports that the average loan term for a used car is 67.4 months. But Clark doesn’t recommend loan terms longer than 42 months. He explains:
Be sure to read Clark’s advice on getting a good deal on a car whether you finance or pay with cash.
2. Choose the Car You Want To Buy
Once you know how you’ll pay for your car, it’s time to do some vehicle research. Specifically, read up on the reliability of any car you’re considering. Consumer Reports is the best place to get this information. You can check out their recommendations and list of best cars for the year in their magazine’s annual auto issue, which is released every April. You can also find their top picks by price category, including:
And take a look at their guide to car reliability and owner satisfaction. Consumer Reports conducts tests on vehicles and relies on data from member surveys to generate their ratings. The company has data spanning decades on several car models and Clark is a big fan. He says:
While some of their reports are free, you might need a subscription to get all the details you want. A digital membership costs $39 for the year or $10 monthly.
If you don’t want to pay, you can ask your local library if they have the most recent April issue. You can also check out the annual Vehicle Dependability Study (VDS) from J.D. Power. The VDS reports how vehicles from several brands perform “in terms of quality, component replacement and appeal” after three years.
“That’s the closest there is to what Consumer Reports does with their predictive reliability,” Clark says.
3. Research Used Vehicle Values
After you find two or three cars that pass the reliability check, your next step is to research their used vehicle values. Here are a few sites we recommend you use to get a feel for the price of pre-owned cars:
As you’re researching used cars, pay attention to what Clark calls, “the three Ms”:
- Make and model,
- model year, and
- maximum mileage.
It’s fine to start with makes/models that you like based on past experiences. But don’t be afraid to branch out — even if that means going back to step two for a bit — and broaden your “car funnel.”
“The big mistake people make is they only consider this Ford or that Toyota,” Clark says. “The idea of the car funnel is that you may have a particular car you’re really interested in, but there may also be a second or third that you also would really like owning and driving.”
By expanding your options when shopping pre-owned, you have a better chance of finding a car that checks most boxes off your list of must-haves and nice-to-haves. And here’s another tip: Don’t be afraid to look at older models and/or cars with higher mileage.
“We have a distortion in the market right now,” says Clark. “Because of the shortage of used cars in the market, people are having to buy used cars with a lot more miles — than historically they would have — to get the price of the car in a price range that they can handle. And that’s bad. But the good is: Cars are more reliable for more miles than they used to be.”
4. Shop Around Online
Now it’s time to move past looking at general price ranges for makes and models you’re interested in. In this step, you get to find actual cars that are available — including the one that could be your next car! Here are some sites you can use to shop around:
Edmunds, KBB, and J.D. Power also connect you with used cars for sale. As you shop around, you’ll come across cars for sale from dealers and private sellers.
“Very few people buy or sell used cars privately,” says Clark. “It’s mostly a car dealer market, and there’s not necessarily any reason why it needs to be a car dealer market, because usually you’re not getting any kind of warranty with it.”
If you need to finance your car, it typically takes less time to buy from a dealer. But private sellers usually sell pre-owned vehicles for less than dealers.
Whether you buy from a dealer or private seller though, it’s important to make sure all paperwork —especially the title transfer — is handled appropriately and in a timely manner.
People tend to be more attentive when dealing with paperwork from private sellers, but Carvana offers a cautionary tale about buyers who blindly trust dealers to take care of business. Consumers across the country have reported issues with getting car titles and registration from Carvana. Things got so bad Carvana was temporarily banned from selling cars in some places like Illinois and Raleigh, N.C. We’ll go into more detail on paperwork and what to look for in the final step of the used car buying process.
5. Contact the Car’s Seller
While online shopping is a great way for buyers to see lots of pre-owned cars at once, sometimes listings don’t get updated or removed on time. So, once you’ve found a car online, the next step is to contact the seller.
Before you do more work or become too attached to a car, this step is a quick way to confirm the car is still available, express interest and ask additional questions. Here are some examples of questions you might consider asking:
- Are there any known issues with the car?
- How long has the car been on the market?
- Do you provide a copy of the VIN report?
- Is the title clean or is it a salvage or rebuilt title?
- How long ago were the photos in the listing taken? Are there any notable differences between the photos online and the car in person?
- Will I be able to test drive the car?
In the next step, you’ll be able to learn more about the car and confirm a lot of what the seller tells you here. But, if you’re going with a private seller, you can also ask about why they’re selling the car.
And if you talk with a seller from a traditional car dealership, be sure to ask if the online price includes all their “junk” fees. Don’t be shy about it! Clark recommends you ask directly, “Does this quote include all made-up fees?” These “made-up fees” — as the consumer champ calls them — hike your price up for things like paperwork fees and document fees. According to Autotrader, “Dealers may charge between $50 and $1,500 for doc fees, which are taxable.”
6. Get the Vehicle’s History Report
Now it’s time to get a report of the car’s history. Every car can be identified by a unique 17-digit vehicle identification number (VIN). The VIN is also used to keep record of all things related to the car. And the VIN report is a great way to verify a car’s online listing and what you learned from contacting the seller in the previous step.
A VIN report will show details like the previous owners of a car, a history of any accidents or reported damages, the status of the car’s title and much more. Some places will try to charge you for a VIN report, which is why — in the step above — we recommend asking the seller for a report.
There are also a few ways you can get a VIN report for free! Here are a few sites we recommend:
To learn more about VIN reports and how to decode your VIN, check out our guide that’s all about free VIN checks before buying a used car.
7. Test Drive the Car
It’s finally time to go see the car and get a feel for your potential purchase. For this step, you’re checking out the car in two phases: before the drive and during.
Before you get into the car, do a walkaround inspection. Look out for things like physical dings, the condition of the tires, any fluid leakage underneath, and any flaws that were included or excluded from the listing.
When you start the car, pay attention to the dashboard and any warning lights that come on. And speaking of lights: Check if all the lights function. Turn them all on (don’t forget about the high beams), check the blinkers, and check the brake lights. If you’re by yourself, you can ask the seller to press the brakes while you walk around or look for the lights on a wall or surface behind the car through the rearview mirror.
If you’re someone who’s into the mechanics of cars, you can also pop the hood and take a look around. But don’t worry: You don’t have do it all. We recommend getting a professional inspection (in step nine). Up to this point, you’re just looking for things that make you feel more or less confident about the car, which varies from person-to-person.
But if everything is to your liking, take the car on the road. Pay attention to how it feels as you drive it at different speeds and up or down hills. Does it accelerate smoothly, do you notice any jerking, and how do the brakes feel? Also, be sure to listen to how the car sounds as you drive.
8. Negotiate the Final Price
Here’s where you get to use everything you learned about the car in the previous steps to get a fair deal on your future car. To negotiate confidently, be prepared to talk about the market value of the car and its condition. You can also use any discoveries from your test drive to support your negotiation.
There may be some differences in negotiating the final price if you’re buying from a dealer or private seller. Private sellers, for example, can set prices based on personal factors like how quickly they want to move the car. But dealers might have a limit outside of their control on how much they can lower the price. And aside from the actual price of the car, dealers may also have additional, negotiable fees that you can discuss. Clark advises:
Your goal is to establish an agreement with the seller on what you’re willing to pay, what they’re willing to take, and ultimately, what the price will be to drive the car away. Do this before you get the car inspected.
“You want to negotiate the price before you pay for an inspection. An inspection is going to cost — depending on the market — in the range of $150-250,” Clark explains. “And I don’t want people paying to inspect a vehicle that they’re not going to end up making a deal on. So, you want to make a deal that is subject to having the inspection done.”
9. Get an Inspection
With the exception of a few places like CarMax and Carvana, used cars are typically sold “as is.” That means no matter what you discover about a car once you drive it off the lot, the vehicle is your problem alone to figure out and can’t be returned.
Don’t rely on any seller to know — or tell you — everything about a car’s condition. Even if the car comes with a warranty, it’s likely to be very limited. And you can’t learn everything about a car from its VIN report or your test drive either.
You need to hire a professional to check out the entire vehicle. Many disaster stories we hear about used cars could be prevented with a proper inspection. Clark says:
“Have the car inspected by a certified diagnostic mechanic of your choosing as a condition of purchase. You can leave a deposit if you wish, but specify in writing that the money must be returned to you if the car doesn’t check out.”
For your inspection, Clark recommends you find an ASE-certified mechanic. The National Institute for Automotive Service Excellence (ASE) recognizes repair shops where a large percentage of their employees are ASE-certified. These shops are called “Blue Seal Recognized.” Check out the ASE website to find one near you.
10. Close the Deal
Before you drive away in your pre-owned car, make sure you review all the paperwork. You want to pay extra attention to these three things: the title, any financing, and extended warranty offers.
When it comes to the title, make sure the seller actually has it. When you get the title depends on how you pay for the car. If you buy from a private seller, the seller’s responsibilities will vary from state-to-state. But the title should be in the seller’s name for the seller to transfer ownership to you. Whoever’s name is on the title must be the one to sign along with you. Even if you’re buying from a dealer, make sure they have the title to the car they’re selling.
For financing, be on the lookout for the best rates until the end! If you secure financing before you go to the dealership, still see if the dealership can beat your lowest rate. Then, if all other loan terms remain the same, it’s fine to go with the dealer’s financing.
As for an extended warranty: Many people want to know if they should get one. Your answer depends on your situation and what makes you most comfortable. But here are some tips from Clark for you to consider as you decide:
- If you can afford the potential cost of car repairs, you should never buy an extended warranty.
- Can’t afford those possible costs? Then you may want to consider buying the vehicle manufacturer’s warranty if it gives you peace of mind. For example, if you are buying a used Ford at a Ford dealership, ask if you can buy Ford’s own warranty on the vehicle.
- Never buy an extended auto warranty from a third party. Stick to the manufacturer’s own warranty.
3 Things To Know Before Buying a Used Car
If the last time you bought a car was before the pandemic, you might be in for a surprise at the current marketplace. The price of new and used cars catapulted in large because of supply-chain disruptions (which led to lots of other issues) during that time.
And while things are slowly getting better, the market for used cars isn’t improving as quickly as that of new cars. Here are three important things to know before you buy a used car:
- According to Cars.com, the average list price of a used car is $28,859 as of January 2024. This is 2.9% lower than the average price a year ago, but 36% higher than the average price in 2019!
- Compared to January 2019, used cars are “more used” these days before they hit the market. For cars under $30,000, you can expect them to be, “1.4 years older and with 10,000 miles more on the odometer.”
- From January 2023 to now, the used car supply is down 4%. Cars.com reports there are “roughly 800,000 fewer used cars to choose from now.”
As you begin your search for a used car, know that you’re not alone if the market isn’t meeting your expectations. It might take a bit of time to find a used car that checks all of your boxes. Maybe that means accepting a car that’s a bit older or has a few more miles than you initially hoped. You might even need to expand your search radius. But the right car can be worth it!
Final Thoughts
Buying a used car can be scary! But there are steps you can follow to ensure you find a reliable car at a fair price. Clark says:
Our ten-step process was designed to empower you through the process of buying a used car. And remember: Used cars are a great way to keep more money in your pockets than paying for something new. But if you decide a new car is a better fit for you, we’ve also got a guide on how to buy a new car. And when you’re ready to insure your car, check out our guide on the best and worst auto insurance companies.
